Is A Short Term Car Loan To Restore Bad Credit A Good Idea?

Question

I was thinking of getting a car through a dealership who deals with bad credit records, in hopes to restore some of my bad record. I am thinking of opening up a new auto loan and having it continued as a open good standing loan for about 6 months to a year. I have the cash to purchase the car in question out right, but would this do the trick instead?

More Answers The Better!

Answer 1

I think you've got car fever and you want to use getting better credit as an excuse to get a new car. I think this because this is the kind of thing I find myself saying to justify an expensive purchase I don't have the money for.

First of all, car dealers that handle bad credit situations are horrible. They have the highest margin, and the worst cars. Whatever car you're thinking about, look up on www.kbb.com how much a 2 year old version of the same car is worth. Subtract that from the price of the new car and this is the price of getting good credit through a car dealer.

I don't understand why people think they need a good FICO score because you can still get a great mortgage though an old-school bank which does manual underwriting.

My advice is to drive the car you have, and save cash to upgrade later. In the long run this will be easier than making car payments. So go take a cold shower, look up the prices of 4 year old cars on the internet and lets beat this car fever.

Answer 2

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Answer 3

Because I don't know the particulars of your situation it is not easy to tell you what exactly will improve your particular situation. If I were you get a secured credit card and make payments. Pull your credit report and see whats going on. Lenders look at your credit in different ways some look at your total debt others your payment history. You can change your credit score by 100 points or so in a year, but adding a car to your debt ratio will most likely bring it down since 30 % of your score is debt to income ratio. ...Meaning you look as if you are a higher risk because you owe more debt then before. I hope that helps ! Good Luck
Kourtnie Donihoo
Debt Analyst
The E.D.A. Group

Answer 4

Keeping your loan in good standing for a year and then paying it all off would be a good idea to improve your credit. I would pay more upfront though, that would be less interest to pay.

Answer 5

I would say yes it would improve your score if he reports monthly. You would also need to keep it on good standing for at least a year to get the most improvement. Just make sure he reports monthly, some places don't. Hope this helps.

Answer 6

I am sure it will definitely increase your credit that way. But you must make sure you pay the bills on time - Good luck with that! Happy new year !